UTC head sees few hurdles for Rockwell Collins acquisition

CEO Greg Hayes still expects the deal to close mid-2018

Greg Hayes

United Technologies Corp.
Greg Hayes United Technologies Corp.

The chief executive of United Technologies Corp. sees little getting in the way of his company’s pending acquisition of Rockwell Collins.

“We don’t see anything that’s going to prevent this from getting done,” UTC CEO Greg Hayes said during an earnings call Wednesday morning.

Hayes was answering a question as to whether his company has discussed the acquisition with large aircraft makers, such as Boeing. Those companies had said last year they had reservations about the deal, which would merge two of their suppliers — Rockwell and UTC division UTC Aerospace Systems.

“We’re working with the (original equipment manufacturers) now to get this thing finalized. Hopefully, we’re not going to hear big objections,” Hayes said.

Hayes also said he still expects the acquisition to close around the middle of this year, pending regulatory approvals.

“Nothing has really come up from a regulatory standpoint that surprises us, so we feel really good about getting this done,” he said.

UTC and Rockwell have said they expect the deal to finish by the third quarter of 2018, which runs from July through September. The acquisition took a big step forward earlier this month when Rockwell shareholders voted to approve it.

In the meantime, Rockwell CEO Kelly Ortberg and UTC Aerospace Systems President Dave Gitlin have been working on an integration plan. Ortberg and Gitlin will lead the division that emerges from the acquisition, which will be called Collins Aerospace Systems.

“I think we’ve got a line of sight to what the organization should look like post-merger. But, more importantly, I think the guys have a really good handle on the integration opportunities and the synergy opportunities,” Hayes said on the call.

Hayes and UTC Chief Financial Officer Akhil Johri also said they expect recently passed changes to federal tax law to help the company pay off the debt it will assume from buying Rockwell.

The deal would have UTC acquire Rockwell for $23 billion, but that does not include the assumption of $7 billion in Rockwell debt.

The new tax law incentivizes companies to bring cash held overseas back to the United States.

Hayes and Johri said UTC initially expected to bring back about $1 billion in cash each year to pay down the debt. Now, they said they may bring back about $3 billion this year and more than $1 billion in future years.

The tax law changes also reduce the corporate income tax rate to 21 percent, a benefit for UTC since Hayes said the company initially had thought Rockwell Collins operations would have to abide by the former 35 percent rate.

“Rockwell is primarily domestic income, so instead of a 35 percent (tax) rate we assumed in the model, that 21 percent rate looks pretty doggone good,” Hayes said.

l Comments: (319) 398-8366; matthew.patane@thegazette.com

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